The Wall Street Journal reports:
The Internal Revenue Service dealt a serious blow to organizations that provide down-payment assistance to home buyers in a ruling that could curtail the ability of lower-income U.S. citizens to purchase homes.
In the past eight years or so, a number of large nonprofit organizations -- including Nehemiah Corp. of America, of Sacramento, Calif., and AmeriDream Inc., of Gaithersburg, Md. -- have doled out hundreds of millions of dollars of cash down-payment assistance to mostly low- and moderate-income home buyers. According to industry estimates, as many as 625,000 people were assisted by such groups with their down payments between 2000-05. The programs have been widely viewed as helping to increase the nation's homeownership rates, which rose to 69% last year from 67% in 1999.
The programs have been contentious because, in an effort to increase sales in some cases, the money for the down-payment assistance came mainly from large home builders and individuals selling their homes.
Just a reminder:
In its ruling yesterday, the IRS said these aid groups funded largely by home builders and other sellers no longer qualify for tax-exempt status because the benefits of the programs are going to sellers and profit-making entities. In its statement, the IRS said it has found "that organizations claiming to be charities are being used to funnel down-payment assistance from sellers to buyers through self-serving, circular-financing arrangements."
The IRS just cut a little bit out of the artificial demand for real estate.
